Smart and flexible energy system?

There needs to be a radical rethink of the current energy system to squeeze out dirty fuels and accommodate emerging technologies.

That’s the conclusion of a recent Policy Exchange report that recommends the removal of several regulatory and policy barriers to create a level playing between cleaner and dirtier forms of electricity.

The report’s author Richard Howard said: “Making the power system smarter will also mean it can provide cheaper and cleaner electricity. The current set of policies is encouraging a growth in dirty diesel generators – exacerbating air pollution in UK cities and towns. The Government needs to level the playing field to encourage the use of cleaner technologies such as demand response and storage. This approach is not only greener, but could also lead to savings worth £90 per household per year by 2030.”

The report recommends a number of measures including the regulation of polluting diesel generators through carbon taxes and a review of the Capacity Market to ensure that technologies such as storage and demand response are able to access longer contracts. It also urges regulatory changes to remove the ‘double charging’ of environmental levies on storage, and it argues that Distributed Network Operators (DNOs) are outdated models which should be considering emerging technologies for better network management.

In the longer-term, the report makes the case for a major reform of the wholesale power market, and a simplification and major overhaul of balancing services managed by National Grid.

This report reflects other calls for system change to incentivise energy storage and demand response technologies.

The Energy and Climate Change Committee (ECC) urged the Government to redesign its Capacity Market to give the market a “clear signal” that demand response capacity is a preferred option to diesel generation plants, and address the regulatory barriers faced by energy storage.

The National Grid’s latest Winter Outlook report highlighted the potential for demand response measures to keep the system balanced during the winter months. A separate ECIU study concluded that an increased uptake of demand response would help to keep the system balanced and cut the cost of national energy security.

The management consultancy Baringa has warned that the market must learn lessons from the unexpected adoption of photovoltaics to ensure it is “not playing catch up again” with the right market arrangements. They said: “Technology is a key enabler in the energy system. The pace of technological innovation is greater than ever and there are new solutions being developed all the time. But their success will depend on the UK energy market’s ability to respond to these quickly.”

This is a timely debate just as the UK government released its long-awaited call for evidence on the transition to a smart and flexible energy system, which focuses on how to create the right market framework for energy storage. It remains to be seen if they are listening.